BENGALURU (Reuters) – India’s deepest recession on record will linger through the rest of this year and begin to lift only in early 2021 as a rapid surge in the coronavirus spread squelches a nascent rebound in consumption and business activity, a Reuters poll showed.
New Delhi has already set aside $266 billion of economic rescue spending and the Reserve Bank of India has slashed interest rates by 115 basis points since March, suggesting more is required to shield the economy from the pandemic-induced disruptions to businesses and livelihoods.
The coronavirus is spreading faster in India than anywhere else in the world, with more than 3.3 million people already infected and related deaths at over 60,000. COVID-19 has kept tens of millions of people shut indoors and made many millions jobless in the world’s second most populous country.
“Although this might be the low point in the ongoing crisis, the rapid increase in infections this quarter provides no hope of a near-term recovery,” said Prakash Sakpal, senior Asia economist at ING.
“The macro policy has hit a snag amid stretched public finances and rising inflation. This means pretty much nothing can save the economy from continued deep declines for the rest of the year.”
With business activity completely stalled for the most part in the previous quarter owing to a nationwide lockdown to contain the virus’ spread, the Indian economy likely shrank 18.3% during that period, according to the August 18-27 poll of over 50 economists.
While that was slightly better than the 20.0% contraction predicted in the previous poll, it would still be the weakest rate by far since official reporting for quarterly data began in the mid-1990s.
The economy is forecast to contract 8.1% in the current quarter and 1.0% in the next – a downgrade from 6.0% and 0.3% contraction, respectively, predicted in a July 29 poll, dashing hopes of a recovery this year.
Asia’s third-largest economy is expected to grow again in the first three months of 2021, by 3.0%.
For a graphic on Reuters Poll: India economic growth and monetary policy outlook:
But that will still leave it down 6.0% for the fiscal year that ends in March, which would be the worst 12-month performance on record, blowing out -5.2% for calendar year 1979, during the second Iran oil crisis. That latest forecast was revised down from a median forecast of -5.1% last month.
Under a worst-case scenario, the contraction for each of those periods was expected to be much deeper than predictions from last month as well as the latest base-case consensus.
For a graphic on Reuters Poll: India economic growth outlook:
While there have been some signs of recovery, with an increase in agricultural produce on good monsoon rains and targeted government spending, a majority of other businesses continue to show weak performance.
The RBI unexpectedly paused last month on rising inflation concerns.
While the consensus showed the central bank was expected to ease once more next quarter by 25 basis points, taking its repo rate to 3.75%, a significant minority of economists, or 20 of 51, predicted the RBI to stay on the sidelines this year.
Asked when Indian GDP would reach pre-COVID-19 levels, over 80% of economists, or 30 of 36, said it was likely to take more than a year, including nine who predicted it to take more than two years.
“The outlook for economic growth is bleak and there are now signs that the post-lockdown recovery has stalled before it ever really got going,” said Darren Aw, Asia economist at Capital Economics, in Singapore.
(For other stories from the Reuters global long-term economic outlook polls package:)
(Reporting by Indradip Ghosh; Polling by Shaloo Shrivastava, Tushar Goenka and Manzer Hussain; Editing by Sam Holmes)
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
